Arm Holdings Plummets 5.7%: What's Behind the Sudden Sell-Off?

Summary
• Arm Holdings (ARM) plunges 5.76% intraday to $123.34, a sharp reversal from its 52-week high of $183.16.
• Goldman Sachs downgrades ARM to 'Sell' with a $120 price target, a 25% cut from prior estimates.
• Semiconductor sector faces mixed signals as AI-driven demand clashes with geopolitical headwinds.
• Options chain shows heightened bearish positioning, with 20 contracts trading at elevated implied volatilities.

Arm Holdings, a linchpin in the global semiconductor ecosystem, has experienced a dramatic intraday selloff amid a cascade of bearish catalysts. The stock’s 5.76% drop to $123.34—its lowest since October—has sparked urgent analysis of its technical and fundamental underpinnings. With Goldman Sachs’ downgrade and a volatile options market, investors are recalibrating their exposure to ARM and the broader sector.

Goldman Sachs Downgrade Sparks Selloff
Goldman Sachs’ downgrade of Arm Holdings to 'Sell' from 'Neutral' on December 15, 2025, triggered a sharp selloff. The firm slashed its price target from $160 to $120, a 25% reduction, citing concerns over ARM’s valuation and competitive pressures in the AI chip landscape. This move followed a string of mixed analyst ratings, including Loop Capital’s 'Buy' and Rosenblatt’s 'Buy' with higher price targets, but the downgrade by a major Wall Street firm amplified bearish sentiment. The downgrade coincided with broader semiconductor sector jitters, as China’s AI chip ambitions and U.S. export controls create uncertainty. ARM’s dynamic PE ratio of 177.5x, well above its 52-week average, further fueled profit-taking.

Semiconductor Sector Volatility as ARM Falters
The semiconductor sector remains a battleground of divergent forces. While AI-driven demand for advanced chips pushes valuations higher, geopolitical tensions and supply chain risks create headwinds. NVIDIA (NVDA), the sector leader, rose 0.785% intraday, reflecting its dominance in AI infrastructure. However, ARM’s 5.76% drop highlights its vulnerability amid competition from China’s homegrown AI chipmakers and U.S. export restrictions. The sector’s 4.7% month-to-month sales growth in October 2025 underscores underlying strength, but ARM’s high valuation and Goldman Sachs’ bearish call have made it a focal point of short-term volatility.

Bearish Options and ETFs in Focus as ARM Tests Support
• MACD: -3.79 (Signal Line: -4.43, Histogram: 0.64) indicates bearish momentum.
• RSI: 48.94 (neutral zone) suggests no overbought/oversold extremes.
• Bollinger Bands: Price at $123.34 near the lower band ($129.39), signaling oversold conditions.
• 200-day MA: $137.80 (current price below, bearish signal).
• Support/Resistance: Key support at $130.89 (previous close), resistance at $139.64.

ARM’s technicals point to a critical test of support levels. The Roundhill ARM WeeklyPay ETF (ARMW) and Leverage Shares 2X Long ARM Daily ETF (ARMG) offer leveraged exposure, though both are down 4.66% and 11.18%, respectively. For options, two contracts stand out under a 5% downside scenario (projected price: $117.17):

1. ARM20251219C128 (Call, $128 strike, 12/19 expiry):
- IV: 47.44% (moderate)
- Leverage Ratio: 111.25% (high)
- Delta: 0.2716 (moderate sensitivity)
- Theta: -0.4992 (high time decay)
- Gamma: 0.0484 (responsive to price swings)
- Turnover: $58,355 (liquid)
- Payoff: $0 (strike above projected price).
- Why: High leverage and gamma make this contract ideal for aggressive bearish bets, though theta decay is a risk.

2. ARM20251219C130 (Call, $130 strike, 12/19 expiry):
- IV: 49.04% (moderate)
- Leverage Ratio: 164.65% (very high)
- Delta: 0.1959 (low sensitivity)
- Theta: -0.3924 (moderate decay)
- Gamma: 0.0390 (moderate responsiveness)
- Turnover: $52,390 (liquid)
- Payoff: $0 (strike above projected price).
- Why: Extreme leverage amplifies potential gains if the selloff accelerates, but delta’s low value means it’s less responsive to smaller price moves.

Action: Aggressive bears may consider ARM20251219C128 for a short-term trade if the $128 level breaks, while ARM20251219C130 offers high-risk, high-reward potential.

Backtest Arm Holdings Stock Performance
Arm Holdings (ARM) has experienced a significant intraday plunge of 6% on December 12, 2025. To assess the stock's performance after this selloff, we need to consider the following points:1. Historical Performance Context: Arm's recent performance reflects broader market volatility, particularly within the semiconductor sector, influenced by factors such as NVIDIA's earnings-driven selloff and macroeconomic concerns.2. Intraday Plunge Impact: The 6% intraday drop on December 12, 2025, marks a notable event affecting short-term momentum. However, to fully evaluate Arm's performance, it's essential to consider the stock's trajectory from 2022 onward.3. Long-Term Performance Metrics: A backtested analysis from 2022 to the present is necessary to understand the stock's recovery or continued decline. This assessment should include metrics like percentage change, volatility, and performance against a benchmark such as the S&P 500.4. Sector-Wide Influence: The semiconductor sector's health significantly impacts Arm's stock performance. NVIDIA's actions, sector-wide profit-taking, and macroeconomic factors all influence Arm's resilience during this period.In conclusion, to fully evaluate Arm's performance post-6% plunge, it is necessary to conduct a comprehensive backtest that includes historical price data, sector performance, and relevant market indicators from 2022 to the present. This analysis will provide insights into Arm's recovery trajectory and the underlying drivers of its stock movement during this period.

ARM at Crossroads: Watch for $128 Breakdown or Sector Catalysts
Arm Holdings’ 5.76% intraday drop has exposed its vulnerability in a sector grappling with AI-driven demand and geopolitical risks. While Goldman Sachs’ downgrade is a key trigger, broader semiconductor dynamics—such as China’s AI chip ambitions and U.S. export controls—will shape its near-term trajectory. Investors should monitor the $128 support level and the sector leader NVIDIA (NVDA), which rose 0.785% today, for directional clues. A breakdown below $128 could accelerate the selloff, but a rebound above $130.89 might reignite bullish momentum. Takeaway: Position for a short-term bearish trade with ARM20251219C128 or watch for a sector-wide catalyst to drive a reversal.